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NewsJessica Fino
14 Mar 2018 10:36am

KPMG, Deloitte and BDO fined for improper audits

The US Securities and Exchange Commission (SEC) has fined foreign affiliates of KPMG, Deloitte and BDO for improperly conducting audits

KPMG in Zimbabwe and South Africa, Deloitte Zimbabwe and BDO Canada were charged by the US authority for conducting audit work without the full oversight of the Public Company Accounting Oversight Board (PCAOB).

The SEC said that the Zimbabwe affiliates of KPMG and Deloitte & Touche improperly audited a publicly traded company without registering with the PCAOB.

Meanwhile, KPMG’s affiliate in South Africa and BDO’s Canadian affiliate were registered with the PCAOB but improperly relied upon the work of the two unregistered foreign component auditors to complete their audits of the company.

The authority said these actions violated PCAOB standards, and charged Deloitte and KPMG in Zimbabwe for violating Section 102 of the Sarbanes-Oxley Act, and BDO Canada and KPMG in South Africa for engaging in improper professional conduct and violating Rule 2-02 of Regulation S-X. The firms were also charged for causing the audit client to violate its reporting obligations.

Without admitting or denying the accusations, BDO Canada agreed to pay a $50,000 fine and Deloitte in Zimbabwe paid a $99,057 penalty. KPMG paid $141,305 in Zimbabwe and $100,000 in South Africa.

Scott Friestad, associate director of the SEC’s division of enforcement, said, “It’s in the best interest of Main Street investors that all firms substantially involved in the audit of a public company are properly registered with the PCAOB so they are subject to the oversight necessary to ensure accuracy and prevent fraud.

“These unregistered foreign component auditors performed significant audit work outside the PCAOB’s regulatory purview, and the principal auditors failed to consider the registration status of these firms as they used their work.”

A KPMG spokesperson said, “KPMG South Africa reached a settlement with the SEC on a matter dating from 2013 and 2014, when KPMG South Africa relied on audit work performed by KPMG Zimbabwe which was not registered with the PCAOB. Following identification of the matter by KPMG quality controls, KPMG South Africa reported the matter timely to the SEC in May 2016.”

Murray Dicks, reputation & risk leader at Deloitte Africa’s legal counsel, said, “We are pleased to have resolved this matter. We are committed to operating in accordance with the highest professional standards and in full compliance with regulatory requirements.”